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This paper analyzes optimal portfolio choice and consumption with stochastic volatility in incomplete markets. Using the Duffie-Epstein (1992) formulation of recursive utility in continuous time, it shows that the optimal portfolio demand for stocks under stochastic volatility varies strongly...
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Much recent work has documented evidence for predictability of asset returns. We show how such predictability can affect the portfolio choices of long-lived investors who value wealth not for its own sake but for the consumption their wealth can support. We develop an approximate solution method...
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This review empirically analyzes the expectations hypothesis (EH) in inflation-indexed (or real) bonds and in nominal bonds in the United States and in the United Kingdom. We strongly reject the EH in inflation-indexed bonds, and also confirm and update the existing evidence rejecting the EH in...
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